The G20 is making 'serious progress' toward an agreement on new bank capital standards, narrowing differences over key points of the reform package, Bank of Canada Governor Mark Carney said on Saturday.

'Toronto has been a very useful summit already to help push people to make some decisions and restrict the range of discussion on what that definition (of capital) is,' Carney said in a CBC radio interview conducted earlier this week.

'We're making serious progress on capital,' he said, adding that he expected the group to sign off on a deal by the November summit of G20 countries.

Leaders from the Group of 20 emerging and advanced nations kick off two days of talks Saturday evening in Toronto, with tougher rules for banks high on the agenda as they seek ways to prevent another round of taxpayer-funded bailouts in the future.

'All systems are going to have to build up more capital and I think we are going to move to a common agreement on what that capital is and what the level needs to be by the Seoul summit in November,' Carney said.

If countries get their banking rules right, with a focus on stricter capital, liquidity and leverage rules, then there is no need for a bank tax, Carney said, although he said he empathized with governments who bailed out banks during the crisis and now wanted to recoup that money through a levy.

With a new bank regime in place, all banks should be allowed to fail just like any other business, he said.

'Our view is that you have to create a system so that an institution can be put to bed if it fails just like if a trucking company fails, or a farmer goes bankrupt ... unfortunately it happens all the time.'

With the US, Britain, Germany and France all planning to go ahead with levies on their own banks, Carney was asked if Canada's refusal to take similar steps could give it an unfair advantage over other countries.

He said any measure elsewhere that reduces bank resiliency and dramatically reduces efficiency would be an 'upside' for Canada.

A levy would reduce banks' resiliency because it implies the need to fund future bailouts, giving banks a free pass to resume excessive risk-taking, he argued.-Reuters